4 Reasons To Be Skeptical About OpenAI’s $500B Stargate Project

A sober look at one of the world’s newest and biggest infrastructure projects.

Protesters fighting a proposed data center stand outside the Loudoun County (Virginia) Government Center on March 13, 2024. Credit: Loudoun Times-Mirror/Jess Kirby.

The numbers are nothing short of gobsmacking. On Tuesday, in a splashy announcement at the White House, OpenAI CEO Sam Altman revealed a new company called The Stargate Project that intends to “invest $500 billion over the next four years building new AI infrastructure” in the US. The new company will “begin deploying $100 billion immediately.”

The numbers are so big that it’s easy to lose context. How much is $500 billion? It’s roughly equal to the GDP of entire countries, including — take your pick — Ireland ($529 billion), Israel ($522 billion), and the United Arab Emirates ($507 billion).

With the announcement, Stargate becomes one of the world’s most expensive infrastructure projects. Last month, China announced it would build a massive hydropower project on the Yarlung Tsangpo River in Tibet at an estimated cost of $136 billion. The price tag for California’s beleaguered high-speed train to nowhere is now $128 billion. Of course, those projects are dwarfed by Neom, the city-in-the-desert project now underway in Saudi Arabia, which is expected to cost $1.5 trillion.

Elon Musk immediately trashed the Stargate deal. Musk, who’s in a legal spat with OpenAI and Altman, claimed that the initial equity funders in the deal (OpenAI, SoftBank, Oracle, and MGX, a tech fund based in the United Arab Emirates) “don’t actually have the money.”

Musk also claimed that SoftBank had secured less than $10 billion for the project. On Wednesday, the ever-charming Musk (net worth: $426 billion) upped the ante by calling Stargate a “fake” and Altman a “swindler.”

Arm, NVIDIA, Oracle, Microsoft, and OpenAI are the “initial technology partners” in Stargate. Asked about the funding for the deal on CNBC, Microsoft CEO Satya Nardella replied, “All I know is, I’m good for my $80 billion.” Such is the staggering power and wealth of Big Tech that its bosses can casually affirm that they are ready and willing to spend such massive amounts of money on AI.

In an announcement posted on X, OpenAI claimed the Stargate Project will “create hundreds of thousands of American jobs, and generate massive economic benefit for the entire world.” It also said it would support the “re-industrialization of the United States” and “provide a strategic capability to protect the national security of America and its allies.”

Those are mighty big claims. Spending $500 billion on an infrastructure project of any kind — and doing so in just four years — is, um, ambitious. Add in the never-ending hype around artificial intelligence, and it appears we may be in the midst of what a former Fed chairman dubbed “irrational exuberance.”

Here’s a sober look at the Stargate Project, with three charts.